Intel Buys Wind River At $884

Intel Corporation (NASDAQ: INTC) has made what many will consider a strange move by acquiring Wind River Systems Inc. (NASDAQ: WIND). But there is more to this than meets the eye and it will give Intel higher sales with high margins

Intel said today it will buy Wind River Systems, a company that lets wireless carriers and cell phone makers build software that’s embedded into phones, for $884 million.

The move is part of Intel’s effort to establish its lightweight microprocessors such as the Atom chip and underscores that Intel is making a big push into software for managing devices such as smart phones, mobile Internet devices, car entertainment systems and other gadgets for which Wind River helps provide embedded software.

Intel and Wind River are both members of the Open Handset Alliance - one being listed as a semiconductor company and one being listed as a software company. Now they are both the same company - Intel just bought Wind River for $884 Million bucks ($11.50/share).

In the deal, Intel will pay $11.50 a share in cash to buy the company.The deal makes sense on a systems level, but it also brings Intel into a new age of competition with some of its traditional partners, including Microsoft, whose Windows CE operating system directly competes with Alameda, Calif.-based Wind River.

Wind River’s board has approved the deal, which is subject to regulatory approval and is expected to close this summer. Wind River will become part of Intel’s software and services group, headed by Renee James.

Wind River has been around since 1981. It has 1,600 employees and revenues of $359.7 million for the fiscal year ended Jan. 31, 2009. Among its thousands of customers are Alcatel-Lucent, BMW, Boeing, Bombardier Transportation, Mitsubishi, Motorola, NASA, Sony, and Verizon.

The processing giant will acquire Wind River in an all-cash buyout valued at $11.50 per share. This comes to $884 million. There is already some hope here for a higher purchase price.

Embedded systems and mobile devices are essentially new growth avenues for Intel, even if you include a recent announcement of a memorandum of understanding between Intel and Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM) for systems on a chip.
Wind River has thousands of customers in a wide range of markets and this will allow a deeper push into smart phones, mobile internet devices, consumer electronics, automotive areas, networking equipment, aerospace and defense, energy, and thousands of other devices. Selling processors in a world where a huge portion of them are heading into sub-$500 PCs creates the need for this acquisition.

Wind River's board of directors has unanimously approved the transaction, but the stock has traded at a small premium to the $11.50 price tag. Some may be hoping for a competing bid. Intel is the perfect buyer, but there are several other technology leaders who could potentially make a play for Wind River.

If you think this buyout is from left field, it is not. Jim Cramer touted Wind River as a buyout candidate over a year ago. With this one trading at $11.54 -- above the acquisition price -- and with a 52-week range of $5.61 to $12.99 there is little surprise that some might be expecting a higher price.

“Wind River is a leading software vendor in embedded devices, and will become part of Intel’s strategy to grow its processor and software presence outside the traditional PC and server market segments into embedded systems and mobile handheld devices. Wind River will become a wholly owned subsidiary of Intel and continue with its current business model of supplying leading-edge products and services to its customers worldwide.”

Intel wants a piece of the growing mobile pie and Wind River is their fork. It appears the company will remain branded as Wind River and will merely become a wholly owned subsidiary - but I would fully expect Intel’s name to become much more prominent in the mobile space over the next year or two as the companies build synergies.

Here is the entire press release from Intel and from WindRiver:

Intel to Acquire Wind River Systems for Approximately $884 Million

SANTA CLARA, Calif., June 4, 2009 – Intel Corporation has entered into a definitive agreement to acquire Wind River Systems Inc, under which Intel will acquire all outstanding Wind River common stock for $11.50 per share in cash, or approximately $884 million in the aggregate. Wind River is a leading software vendor in embedded devices, and will become part of Intel’s strategy to grow its processor and software presence outside the traditional PC and server market segments into embedded systems and mobile handheld devices. Wind River will become a wholly owned subsidiary of Intel and continue with its current business model of supplying leading-edge products and services to its customers worldwide.

“This acquisition will bring us complementary, market-leading software assets and an incredibly talented group of people to help us continue to grow our embedded systems and mobile device capabilities,” said Renee James, Intel vice president and general manager of the company’s Software and Services Group. “Wind River has thousands of customers in a wide range of markets, and now both companies will be better positioned to meet growth opportunities in these areas.”

“Our combination of strengths will be of great benefit to Wind River’s existing and future customers,” said Ken Klein, Wind River Chairman, president and CEO. “As a wholly owned subsidiary, Wind River will more tightly align its software expertise to Intel’s platforms to speed the pace of progress and software innovation. We remain committed to continuing to provide leading solutions across multiple hardware architectures and delivering the same world-class support to which our customers have grown accustomed.”

The acquisition will deliver to Intel robust software capabilities in embedded systems and mobile devices, both important growth areas for the company. Embedded systems and mobile devices include smart phones, mobile Internet devices, other consumer electronics (CE) devices, in-car “info-tainment” systems and other automotive areas, networking equipment, aerospace and defense, energy and thousands of other devices. This multi-billion dollar market opportunity is increasingly becoming connected and more intelligent, requiring supporting applications and services as well as full Internet functionality.

The board of directors of Wind River has unanimously approved the transaction. It is expected to close this summer, subject to certain regulatory approvals and other conditions specified in the definitive agreement. Upon completion of the acquisition, Wind River will report into Intel’s Software and Services Group, headed by Renee James.

Wind River – A Leader in Embedded Software
As an Intel subsidiary, Wind River will continue to develop innovative, commercial-grade software platforms that support multiple hardware architectures that are optimized for the needs of its many embedded and mobile customers. The acquisition will boost Wind River’s Intel-architecture focused sales as it gains access to the company’s technology investments, brand, employees and global sales force.

Founded in 1981, Wind River is a publicly held company with headquarters in Alameda, Calif., with more than 1,600 employees and operations in more than 15 countries. During its fiscal year ended Jan. 31, 2009, Wind River reported annual revenues of $359.7 million.



Wind River develops operating systems, middleware (software found between an OS and software application), and software design tools for a variety of embedded computing systems. Its main products include VxWorks, the market-leading proprietary and multicore-ready real-time operating system, and commercial-grade Linux software platforms. The company also provides design services and software expertise, including custom-built solutions, development tools and device testing products.

With thousands of customers, Wind River technology is relied upon by most major computer and networking communications companies, and used by corporations and government agencies such as Alcatel-Lucent, BMW, Boeing, Bombardier Transportation, Mitsubishi, Motorola, NASA, Sony, Verizon and many more.

Intel is acquiring Wind River under terms an agreement under which Intel will acquire all outstanding Wind River common stock for $11.50 per share in cash, or about $884 million in the aggregate.

Depending on how military and embedded systems designers perceive the deal, Intel's acquisition of Wind River may create a market opportunity for real-time software providers who compete directly with Wind River, such as Green Hills Software in Santa Barbara, Calif., and Sysgo AG in Klein-Winternheim, Germany.

At the same time, however, Wind River competitors in real time operating system software now must compete with the marketing might that Intel brings to the table.

Among the reasons for the acquisition is to enable Intel to compete more directly with Microsoft for military embedded systems, as well as embedded applications, experts say. Intel already offers a version Linux called Moblin.

With the Wind River acquisition, Intel also gains powerful real-time Linux expertise in Wind River's RT Linux product, which Wind River acquired in 2007 from Finite State Machine Labs Inc., (FSMLabs) in Socorro, N.M.

"This acquisition will bring us complementary, market-leading software assets and an incredibly talented group of people to help us continue to grow our embedded systems and mobile device capabilities," says Renee James, Intel vice president and general manager of the company's Software and Services Group.

"As a wholly owned subsidiary, Wind River will more tightly align its software expertise to Intel's platforms to speed the pace of progress and software innovation," says Ken Klein, Wind River chairman, president, and chief executive officer.

"We remain committed to continuing to provide leading solutions across several hardware architectures and delivering the same world-class support to which our customers have grown accustomed," Klein says.

The acquisition will deliver to Intel software capabilities in embedded systems and mobile devices such as aerospace and defense, energy, smart phones, mobile Internet devices, and automotive information and entertainment systems.

The board of directors of Wind River has unanimously approved the transaction, and the deal is expected to close this summer, after which Wind River will report into Intel's Software and Services Group.

Wind River is also a member of the Open handset Alliance, and has a commercial software solution based on Google’s Android that runs on Qualcomm’s Snapdragon chipsets.

Intel’s Atom-based automotive infotainment reference design is based on the new Genivi Alliance specification. It runs Wind River Linux. In March, the two companies signed a major deal on supporting multi-core designs in aerospace and defense, network infrastructure, industrial, medical, and print imaging market segments, spanning Wind River’s Linux and VxWorks platforms.

The acquisition will boost Wind River’s Intel-architecture focused sales, says Intel. It is unclear, however, the extent to which the new subsidiary might support development on other platforms where Wind River has long-standing relationships with semiconductor companies including ARM, Texas Instruments and Freescale. Wind River has about 1,600 employees and annual sales of $359.7 million.

Embedded systems are dedicated to specific tasks, so design engineers can optimize it, reducing the size and cost of the product, or increasing the reliability and performance.